MEMPHIS, Tenn. (AP) -- Pilots at Federal Express Corp. approved their first contract with the world's largest cargo airline on Thursday, 2 1/2 months after backing down from a strike threat.

The pilots' union said 86 percent of its voting members approved the deal, which provides a 17 percent raise over five years. The vote for ratification was 2,516-395.

Though pilots had sought a 24 percent raise over four years, the union said its members were pleased with company concessions on flight scheduling and retirement benefits.

The Fedex Pilots Association, the only union among FedEx's U.S. employees, has represented the company's 3,600 fight crew members since 1996. Pilots have been trying to negotiate a contract since 1993.

The company has long opposed unionization.

``This contract offers significant enhancements for FedEx pilots in terms of scheduling, work rules and salary,'' said Frank Fato, the union's president. ``In particular, it gives FedEx pilots the best retirement package in the airline industry.''

The contract boosts pension payments from 41 percent of a pilot's final-year pay to 72.5 percent. For a 30-year veteran who flies a wide-body plane and earns $225,000, the increase amounts to $70,875 a year.

Pilots also now will have a say on flight schedules, and a committee of pilots and company managers will handle complaints. A new scheduling system put in place last year by the company often had pilots hustling to catch connecting flights or making too many takeoffs and landings, the union said.

``This contract keeps our pilots' compensation package competitive with peers at other major airlines, and it recognizes the vital contributions they provide in maintaining FedEx's leadership position in our industry,'' Ted Weise, the president of FedEx, said in a statement.

FedEx pilots began negotiating a contract in 1993, when they were represented by the Air Line Pilots Association. The pilots twice rejected tentative contracts sent to them by union leaders.

The Fedex Pilots Association began representing the pilots in 1996. Its leadership endorsed the contract in December and mailed ballots to members last month.

The pilots threatened a holiday-season strike in October after contract talks broke off.

The talks resumed Nov. 20 after FedEx founder and chairman Frederick Smith warned the pilots they might lose their jobs if they went on strike and after nonunion employees demonstrated in favor of the company.

Paul Schlesinger, a market analyst for Donaldson Lufkin & Jenrette in New York, said the contract ratification will help reduce tensions between the pilots and the company.

``There were some wounds that will take a while to heal. If the wounds fester, the company's going to have a problem. If everybody works to heal them, then the company can overcome that,'' Schlesinger said.

Bryan Davies, chairman of the pilots' negotiating committee, said he's hopeful subsequent negotiations will be smoother than the acrimonious road to an initial contract when ``everything was at issue.''

Memphis-based FedEx was founded in 1973 and is owned by FDX Corp [NYSE:FDX - news]. It has 145,000 employees worldwide and ships more than 3 million items to 211 countries each day.